Industry hacker Tim Hwang builds FiscalNote to take on Bloomberg and Lexis-Nexis

How can Tim Hwang, a 23-year-old entrepreneur, disrupt the data intelligence industry with his start-up, FiscalNote? Learn about the chain of events that led Tim to build FiscalNote and learn how to adopt his outlook in this new monthly column in the Australian Financial Review, “Industry Hackers”, which explores the mindset of pioneers and entrepreneurs who see the world differently.

The Sharing Economy: Dictionary of Commonly Used Terms

Terms can become hard to define when they become too big. By too big, I do not mean in terms of impact or scale. It happens when the connections between a broad church of products, services and ideas becomes so loose and diluted that the umbrella term starts to lose meaning. The more inaccurately the term is applied the more its value is questioned, and eventually the flame of meaning behind an important concept burns out. It becomes a passing buzzword. Is this the current state of the so-called ‘sharing economy’?

These days, it seems that any platform that uses the power of the internet to efficiently match people’s wants with people’s haves is labelled the ‘sharing economy’. No wonder we are in a mess trying to describe how the likes ofAirbnb, Uber and Taskrabbit are connected. No wonder we find ourselves in a place where leaders such as Senator Clinton uses multiple terms in one speech. No wonder the media frequently opts for the ‘sharing economy’ but then subsequently attacks the term for not being fit to describe the different economic activities it encompasses. And so we invent more terms such as ‘on-demand economy’ or my least favorite, the ‘gig economy’. Seriously, how many ‘economies’ can we have?

It’s tricky to find the right definitions because people naturally apply different lenses and language when thinking about similar ideas and examples.There are multiple focuses: on the benefit (e.g. access), behavior (e.g. sharing), business model (rental) or even a market structure (e.g. peer-to-peer).

Combing through dozens of articles and research papers revealed a starter list of commonly used terms. It is unlikely that we’ll arrive at precise terms, but this post is an effort to make the distinctions clearer and to shine a light on the mechanisms and principles behind the terms.

Umbrella Terms: Terms used to apply to a group of ideas or companies with commonalities.

Access Economy: Systems that enable people to pay for access to the benefit of goods rather than needing to own them outright.

Note: When using this term, consider whether the example is focused on delivering the benefit of access over ownership. For example, people are able to access media content easily from Netflix or Spotify, or access a car from a carclub like Zipcar.

Circular Economy: Systems that generate the most efficient use of resources by extracting maximum value from products and materials while in use, and extending longevity through reuse at the end of a lifecycle.

Note: When using this term, consider whether the example focuses on the benefit of maximizing the efficiency of use of a product or material. For example, people are able to buy used Patagonia items through Yerdle, or recycle and repurpose their trash with Terracycle and Preserve.

Note: When using this term, consider whether the behavior around exchanging assets changes and becomes more efficient through technology. For example, Airbnb enables people to rent out their homes and unused spare rooms to guests. Zopa allows people to borrow money from not just their family or friends but from beyond their social circle. And eBay elevates the “garage sale” allowing people to sell their unwanted things to people not just in their locality but to people with access to the internet.

CollaborativeEconomy: Systems that unlock value from underused assets* by matching ‘needs’ and ‘haves’ in ways that bypass traditional intermediaries and distribution channels.

Note: When using this term, consider whether the example focuses on bypassing the traditional intermediaries to change the dynamics of supply and demand. For example, Vandebron enables people to buy their power directly from independent energy producers. Food Assembly allows people to buy their fresh produce from local farmers. Upcounsel allows people to select and hire an attorney directly from a marketplace. Uber enables people to get car rides directly from Uber drivers in the vicinity.

Gift Economy: Systems that enable goods or services to be given without any immediate payment or expectation of future quid pro quo.

Note: When using this term, consider whether the example facilitates true gifting of a product or service. For example, Freecycle enables networks of people who want to give and get stuff for free, Impossible enables people to give away their time, skills and objects within the social network, andCouchsurfing enables people to connect with locals to stay on their couch for free.

Gig Economy: Systems that break up a traditional company ‘job’ into individual ‘gigs’ that independent workers are paid to do for a defined time.

Note: When using this term, consider whether the example changes the nature of work, and the worker relationship between the provider, customer and intermediary platform. For example, TaskRabbit pays task runners for every singular task they fulfil. Uber pays drivers per ride they give passengers. Postmates pays workers per delivery they are able to take.

On-Demand Economy: Systems that instantly match buyers and sellers to deliver goods and services immediately when people need them.

Note: When using this term, consider whether the example is focused on time-based benefits such as immediate convenience or instant gratification.Instacart allows people to get their groceries delivered in an hour. Drizlyallows people to get liquor delivered in under an hour. Amazon Primemembership expedites shipping and enables people to receive their orders within the hour if they are in the metropolitan area.

Peer Economy: Systems that connect buyers and sellers facilitating the exchange of assets directly between individuals.

Note: When using this term, consider whether the example uses a genuine peer-to-peer mechanism. For example, Transferwise matches people based on the currency they have and require in order to make a currency swap.Etsy connects makers of crafts with buyers looking for unique or handmade products. Lyft connects people looking for a car ride with everyday drivers offering services.

Rental Economy: Systems that enable people to rent assets for a fee rather than needing to own them outright.

Note: When using this term, consider whether the example asks for a fee in exchange for rental of a good. For example, Rent The Runway allows people to rent designer clothes, Chegg allows people to rent textbooks, and Getableallows companies to rent construction equipment.

Sharing Economy: Systems that facilitate the sharing of underused assets* or services, for free or for a fee, directly between individuals or organizations.

Note: When using this term, consider whether the example unlocks the value of an *underused asset be it space, skills or stuff, and whether the user behavior involves sharing. For example, Cohealo allows hospitals to share equipment when it’s not in use. BlaBlacar enables people going on long-distance trips to share their empty seats. Peerby enables neighborhoods to share goods.

*‘Idling Capacity’ is the term used to describe the untapped social, economic and environmental value of underused assets.

In addition to the above, there are terms we commonly use to describe the models and market mechanics behind these terms.

Platforms: The network, marketplace or other digitally-enabled mechanism used to facilitate an exchange.

Providers: People on the supply side of marketplaces providing goods and services.

Customers: People on the demand side of a marketplace wanting goods and services.

Providers are also commonly referred to as:

Sellers: People who make the final sale of goods and services. They do not necessarily need to be the producers or makers of the goods and services. For example, eBay sellers.

Micro-earners: People who take on a range of tasks or ‘gigs’ in order to make a supplementary income. For example, Taskrabbit runners who also may deliver groceries on Instacart or goods on PostMates.

Micro-entrepreneurs: People who are empowered to make or save money by offering their existing assets, or services to other people. For example,Airbnb hosts and consultants on HourlyNerd.

Makers: People who independently create products. They may use the internet to fund and bring products to market. For example, makers on Etsyand inventors on Kickstarter.

Market Mechanisms: These are ways in which the market contributes to the creation, production or distribution of a service or product.

Co-Creation (or Co-Design): Companies ask outside experts or customers to participate in the design or production of goods or services. For example, the T-shirt company Threadless

Co-Housing: Private households who choose to form a community that shares a home with common facilities to facilitate social interaction and share household responsibilities. For example, Bowden House Communityand LILAC in the UK.

Co-operatives: Business or organizations that are jointly owned by its members, with profits and benefits shared among them. For example, local community co-ops such as Park Slope Food Coop in Brooklyn, New York.

Co-Working: Groups of independent workers who choose to share office spaces and resources, to cut down on costs and to facilitate social interaction. For example, the workspaces of WeWork and the Hub.

Commons-based peer production: People band together, free of any hierarchy or organizational structure, to collaborate on projects in order to achieve a common outcome. For example, Wikipedia and local community gardens.

Crowdfunding: A large and diverse group of people contribute money to fund projects, ideas or products that they believe in. For example,Kickstarterand Indiegogo.

Crowdsourcing: A large group of people provide input into a particular task, idea or problem for free or for a fee. For example, Topcoder and MIT’sClimate CoLab

Crowdvesting: A large and diverse pool of investors raise capital in exchange for equity in a company. For example, CrowdCube and CircleUp

MOOCs (Massive Open Online Courses): Learning programs delivered through online platforms that enable a large number of geographically dispersed and diverse range of students to enroll in courses. For example,Coursera and Udemy

Open Innovation: The use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively (Chesbrough,2011). For example, P&G Connect + Develop

Open Sourcing: The licensing of a product to permit modifications and redistribution of its source code. For example, Github and Linux.

Social Lending (Also referred to as ‘Peer Lending’): The lending and borrowing of money between individuals, without going through a traditional financial institution. For example, Zopa and Lending Club

Transaction Models: The model that describes the ownership of an asset and how it is distributed from provider to customer.

Business-to-business: Models where businesses monetize the idling capacity of their existing assets and transact the value with other businesses. For example, Cohealo and Storefront

Business-to-consumer: Models where businesses own assets and facilitate transactions among users who share the asset. For example, Zipcar andChegg

Peer-to-peer: Models where assets are owned and transacted directly between individuals or a group of individuals. For example, Peerby andBlaBlaCar

Peer-to-business-to-peer: Models where assets owned by individuals are provided to existing business providers who offer directly to individuals as part of a broader offering. For example, BeMate and EasyCarclub

Revenue Models: The following are the common models used to generate revenue in collaborative-based networks and marketplaces.

Service fees: A company takes a percentage of the total transaction for successfully matching two sides of marketplace (e.g. hosts and guests, buyers and sellers, drivers and passengers).

Flat membership/subscription: A company charges a flat monthly or annual membership fee regardless of usage.

Tiered subscription: A company offers a range of subscription plans at different price points based on frequency of use or number of goods desired.

Membership plus usage: A company charges a one-off or annual membership fee (sometimes with different plans offered based on frequency of use). Additional fees are charged based on usage.

White label: A company creates a back-end platform that can be licensed and branded by other companies.

Freemium: A company offers basic services or use of the platform/app for free. Users then ‘trade up’ for additional benefits and exclusive features.

Where does loyalty lie in the collaborative economy?

“How does it make you feel?” is a question I commonly ask when I meet hosts on Airbnb, drivers on Lyft or Taskrunners onTaskrabbit to try to understand the role this rising breed of companies in the collaborative economy play in people’s lives. What I have noticed is that I often don’t get a simple answer but they tell me a story, their story of why they are doing what they are doing. And embedded in these tales is a cult-like sentiment that could rival Apple devotees, Harley Davidson fanatics or Star Trek groupies.

To have achieved this level of devotion from their users is incredible given that many of these start-ups are less than five years old, have spent very little on traditional advertising and have relatively small marketing teams compared to established brands.

So what can we learn from the collaborative economy in terms of opportunities to engage people and build loyalty in new ways?

PEER TRUST VS. INSTITUTIONAL TRUST:

In the 20th century, brands were built on ‘institutional trust’; the company created a product or a service and controlled the way it was distributed. Marketing and communications were built in a similar fashion centrally creating all the information and images that would shape consumers perceptions of their brand. In other words, brands had immense power over consumers to tell them whom and what to trust, what products and services to buy. And for the most part, people felt safe trusting these recommendations.

But today, we are seeing an erosion in confidence in established hierarchies, and the rise of decentralized platforms and marketplaces built on peer trust. Technologies are making it easier by reducing the fear of interacting and directly exchanging with ‘strangers’. Our peers are not just shaping our purchasing decisions through online review platforms such as Yelp, TripAdvisor and Angie’s List but are increasingly the people we want to directly transact with, bypassing traditional institutions.Established brands need to embrace that the role of the ‘institution’ dramatically changes in a peer trust environment. A shift from centralized controller to trusted third party facilitator is required; and this is harder than it sounds because it means companies have to accept that they have to let go and get out of the way around what providers and customers choose to do.

It’s a complicated new world because customers may not want the company involved 99% of the time if the exchange with their peer is a positive one, but when something does go wrong, the traditional company is what they seek. For example, if my driver on Uber is rude, I will contact the company, not the driver to complain and get a refund.

Takeaway:We are currently in a trust dance between people increasingly trusting direct connections with other people but falling back on the role of the established institution when peer trust fails. Brands have to figure out how to play in both worlds.

SOCIAL STANDING VS. ELITE STATUS
As collaborative marketplaces mature and competition increases, companies are forced to focus on their own loyalty solutions to attract, grow and ultimately retain relationships.

It is early days but what we are starting to see is that traditional reward programs (points, discounts, offers) are sometimes offered but they are becoming secondary to mechanisms that give people ‘reputation capital’; a concept I define as ‘the sum worth of what a community thinks of you.’

It is a new kind of ‘elite status,’ where people’s social standing in the marketplace is transparent to others and increasingly valuable. As marketplaces grow, competition between providers and even customers grows. Why should I rent a place from Joe when Susie place looks just as lovely and she has a better reputation?

Take Airbnb, the company currently does not offer a traditional rewards program for hosts and guests that is similar to hotel loyalty schemes. Instead they are focusing on building a cult-like loyalty between hosts and the company, and more importantly between hosts. (Note: the current focus is on hosts not on guests because hosts are the suppliers who control the quality of the brand’s experience.)

Here are just a handful of things Airbnb is doing:

Celebrate ‘SuperHosts’: Just like power sellers on eBay, hosts that continually provide a great experience for guests are rewarded with stellar reviews and subsequently become part of the ‘Superhost’ program

Social Perks: People who reach Superhost status then receive perks including: badge they can put on their listings, priority support, travel coupons and are involved in previewing upcoming product releases. Their places are also profiled in visible places such as ‘Airbnb Picks’, appear high in the listings and are featured in the company’s quarterly magazine, Pineapple, featuring “stories as told by the unexpected characters of our community”

Local Groups: Airbnb has created a platform for hosts to form local groups that get together and learn from each other.

Mega Events: For example, Airbnb Open, was a three-day conference that brought together 1,500 hosts from more than 40 countries. Hosts swapped stories and ‘secrets’ of hosting but the real goal was to make them feel an infectious connection to global home-sharing movement.

Takeaway
Collaborative brands are moving away from “of the moment” transactional loyalty (I make a purchase and am rewarded for that purchase) towards social status loyalty that enables them to build meaningful relationships at scale. Or as Jonathan Mildenhall, Airbnb’s CMO puts it “‘Community-Driven Superbrands’.

PARTICIPATION VS. TRANSACTIONS

Traditional brands are trying to enter the collaborative economy through investments, acquisitions and new offerings. But the common way to enter is to partner with start-ups in the space to achieve the following:

Meet a new behaviour: Brands are recognizing that they need to evolve to meet a range of behaviours beyond buying such as sharing, renting, collaborating, and swapping.

Customers can now rent tools and trucks on Home Depot, rather than buy equipment that may only be used occasionally

Argos has created a toy swapping platform to make it easy for customers to get rid of their unwanted toys (and get a voucher to buy new ones)

Takeaway
Most collaborative start-ups are not yet household names but they offer interesting ways for established brands to get beyond transactional relationships with customers, and create new forms of participation and ultimately deeper engagement.

We are just at the beginning of the beginning in seeing how brands in the collaborative economy will reshape company relationships and loyalty with customers. I believe the likes of Airbnb,Etsy and Lyft will not only challenge traditional marketing techniques but become a new breed of community-driven brands that redefine how we think about trust and shared-value.

Where does loyalty lie in the Collaborative Economy?, collaborativeconsumption.com

“How does it make you feel?” is a question I commonly ask when I meet hosts on Airbnb, drivers on Lyft or Taskrunners on Taskrabbit to try to understand the role this rising breed of companies in the collaborative economy play in people’s lives. What I have noticed is that I often don’t get a simple answer but they tell me a story, their story of why they are doing what they are doing. And embedded in these tales is a cult-like sentiment that could rival Apple devotees, Harley Davidson fanatics or Star Trek groupies.

To have achieved this level of devotion from their users is incredible given that many of these start-ups are less than five years old, have spent very little on traditional advertising and have relatively small marketing teams compared to established brands.

So what can we learn from the collaborative economy in terms of opportunities to engage people and build loyalty in new ways?

PEER TRUST VS. INSTITUTIONAL TRUST:

In the 20th century, brands were built on ‘institutional trust’; the company created a product or a service and controlled the way it was distributed. Marketing and communications were built in a similar fashion centrally creating all the information and images that would shape consumers perceptions of their brand. In other words, brands had immense power over consumers to tell them whom and what to trust, what products and services to buy. And for the most part, people felt safe trusting these recommendations.

But today, we are seeing an erosion in confidence in established hierarchies, and the rise of decentralized platforms and marketplaces built on peer trust. Technologies are making it easier by reducing the fear of interacting and directly exchanging with ‘strangers’. Our peers are not just shaping our purchasing decisions through online review platforms such as Yelp, TripAdvisor and Angie’s List but are increasingly the people we want to directly transact with, bypassing traditional institutions.Established brands need to embrace that the role of the ‘institution’ dramatically changes in a peer trust environment. A shift from centralized controller to trusted third party facilitator is required; and this is harder than it sounds because it means companies have to accept that they have to let go and get out of the way around what providers and customers choose to do.

It’s a complicated new world because customers may not want the company involved 99% of the time if the exchange with their peer is a positive one, but when something does go wrong, the traditional company is what they seek. For example, if my driver on Uber is rude, I will contact the company, not the driver to complain and get a refund.

Takeaway:We are currently in a trust dance between people increasingly trusting direct connections with other people but falling back on the role of the established institution when peer trust fails. Brands have to figure out how to play in both worlds.

SOCIAL STANDING VS. ELITE STATUS
As collaborative marketplaces mature and competition increases, companies are forced to focus on their own loyalty solutions to attract, grow and ultimately retain relationships.

It is early days but what we are starting to see is that traditional reward programs (points, discounts, offers) are sometimes offered but they are becoming secondary to mechanisms that give people ‘reputation capital’; a concept I define as ‘the sum worth of what a community thinks of you.’

It is a new kind of ‘elite status,’ where people’s social standing in the marketplace is transparent to others and increasingly valuable. As marketplaces grow, competition between providers and even customers grows. Why should I rent a place from Joe when Susie place looks just as lovely and she has a better reputation?

Take Airbnb, the company currently does not offer a traditional rewards program for hosts and guests that is similar to hotel loyalty schemes. Instead they are focusing on building a cult-like loyalty between hosts and the company, and more importantly between hosts. (Note: the current focus is on hosts not on guests because hosts are the suppliers who control the quality of the brand’s experience.)

Here are just a handful of things Airbnb is doing:

Celebrate ‘SuperHosts’: Just like power sellers on eBay, hosts that continually provide a great experience for guests are rewarded with stellar reviews and subsequently become part of the ‘Superhost’ program

Social Perks: People who reach Superhost status then receive perks including: badge they can put on their listings, priority support, travel coupons and are involved in previewing upcoming product releases. Their places are also profiled in visible places such as ‘Airbnb Picks’, appear high in the listings and are featured in the company’s quarterly magazine, Pineapple, featuring “stories as told by the unexpected characters of our community”

Local Groups: Airbnb has created a platform for hosts to form local groups that get together and learn from each other.

Mega Events: For example, Airbnb Open, was a three-day conference that brought together 1,500 hosts from more than 40 countries. Hosts swapped stories and ‘secrets’ of hosting but the real goal was to make them feel an infectious connection to global home-sharing movement.

Takeaway
Collaborative brands are moving away from “of the moment” transactional loyalty (I make a purchase and am rewarded for that purchase) towards social status loyalty that enables them to build meaningful relationships at scale. Or as Jonathan Mildenhall, Airbnb’s CMO puts it “‘Community-Driven Superbrands’.

PARTICIPATION VS. TRANSACTIONS

Traditional brands are trying to enter the collaborative economy through investments, acquisitions and new offerings. But the common way to enter is to partner with start-ups in the space to achieve the following:

Meet a new behaviour: Brands are recognizing that they need to evolve to meet a range of behaviours beyond buying such as sharing, renting, collaborating, and swapping.

Customers can now rent tools and trucks on Home Depot, rather than buy equipment that may only be used occasionally

Argos has created a toy swapping platform to make it easy for customers to get rid of their unwanted toys (and get a voucher to buy new ones)

Takeaway
Most collaborative start-ups are not yet household names but they offer interesting ways for established brands to get beyond transactional relationships with customers, and create new forms of participation and ultimately deeper engagement.

We are just at the beginning of the beginning in seeing how brands in the collaborative economy will reshape company relationships and loyalty with customers. I believe the likes of Airbnb,Etsy and Lyft will not only challenge traditional marketing techniques but become a new breed of community-driven brands that redefine how we think about trust and shared-value.